USD/CAD remains depressed, holds above 1.3700 mark ahead of US/Canadian jobs report

• USD/CAD meets with some supply on Friday and snaps a two-day winning streak.
• The USD edges lower amid some repositioning trade ahead of the US NFP report.
• The recent bullish run in oil prices underpins the loonie and contributes to the fall.
• The downside seems limited ahead of the key jobs report from the US and Canada.

The USD/CAD pair struggles to capitalize on its gains recorded over the past two trading sessions and comes under some selling pressure on Friday. The pair remains depressed through the first half of the European session and is currently placed near the daily low, just above the 1.3700 round-figure mark.

The US dollar retreats from the vicinity of the weekly high amid some repositioning trade ahead of the closely-watched US monthly jobs data. The Canadian dollar, on the other hand, is underpinned by the overnight hawkish remarks by the Bank of Canada Governor Tiff Macklem and the recent bullish run-up in crude oil prices. This, in turn, is seen exerting downward pressure on the USD/CAD pair, though the downside seems cushioned, at least for the time being.

The OPEC+ decision to slash production by about 2 million bpd - the largest reduction since the 2020 COVID pandemic - continues to act as a tailwind for the black liquid. That said, concerns that a deeper global economic downturn will dent fuel demand keep a lid on any further gains. Adding to this, the prospects for a more aggressive policy tightening by the Fed should limit losses for the greenback and lend some support to the USD/CAD pair.

In fact, the markets seem convinced that the US central bank will continue to hike rates at a faster pace to curb inflation and have been pricing in another supersized 75 bps increase in November. The bets were reaffirmed by the recent hawkish remarks by several Fed officials, which remain supportive of elevated US Treasury bond yields. This, along with recession fears, supports prospects for the emergence of some dip-buying around the safe-haven buck.

Traders might also prefer to wait for the release of the crucial monthly employment details from the US and Canada, due later during the early North American session. Hence, it will be prudent to wait for strong follow-through selling before confirming that this week's solid rebound from the 1.3500 psychological mark has run out of steam and placing fresh bearish bets around the USD/CAD pair.

Technical levels to watch